SECURITIES AND EXCHANGE COMMISSION
Room 1004
450 Fifth Street, NW
Washington, DC 20549
RE: Quarterly Report on Form 10-Q
Gentlemen:
We are transmitting for filing the quarterly report of Vishay
Intertechnology, Inc., on Form 10-Q for the quarter ended September
30, 1994.
Sincerely yours,
Vishay Intertechnology, Inc.
/s/ Richard N. Grubb
-----------------------------
Richard N. Grubb
Vice President, Treasurer
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-7416
VISHAY INTERTECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 38-1686453
(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or organization) Number)
63 Lincoln Highway, Malvern, Pennsylvania 19355
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (610) 644-1300
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes x No
As of November 8, 1994 registrant had 21,387,181 shares of its
Common Stock and 3,874,724 shares of its Class B Common Stock
outstanding.
<PAGE>
VISHAY INTERTECHNOLOGY, INC.
FORM 10-Q SEPTEMBER 30, 1994
CONTENTS
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Condensed Balance Sheets - 3-4
September 30, 1994 and December 31, 1993
Consolidated Condensed Statements of 5
Operations - Three Months Ended
September 30, 1994 and 1993
Consolidated Condensed Statements of 6
Operations - Nine Months Ended September
30, 1994 and 1993
Consolidated Condensed Statements of 7
Cash Flows - Nine Months Ended
September 30, 1994 and 1993
Notes to Consolidated Condensed 8-9
Financial Statements
Item 2. Management's Discussion and Analysis 10-13
of Financial Condition and Results of
Operations
PART II. OTHER INFORMATION 14
<PAGE>
VISHAY INTERTECHNOLOGY, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(Unaudited - In thousands)
September 30 December 31
ASSETS 1994 1993
----------- -----------
CURRENT ASSETS
Cash and cash equivalents $31,250 $10,931
Accounts receivable 165,368 125,284
Inventories:
Finished goods 94,361 85,783
Work in process 92,012 65,592
Raw materials 98,793 73,280
Prepaid expenses and
other current assets 48,494 33,365
----------- -----------
TOTAL CURRENT ASSETS 530,278 394,235
PROPERTY AND EQUIPMENT - AT COST
Land 40,287 33,791
Buildings and improvements 168,526 136,432
Machinery and equipment 508,791 398,885
Allowance for depreciation (189,625) (149,004)
----------- -----------
527,979 420,104
GOODWILL 225,859 118,286
OTHER ASSETS 23,836 15,481
----------- -----------
$1,307,952 $948,106
=========== =========== <PAGE>
September 30 December 31
LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1993
----------- -----------
CURRENT LIABILITIES
Notes payable to banks $34,961 $22,695
Trade accounts payable 55,092 48,404
Payroll and related expenses 44,244 28,942
Other accrued expenses 56,460 54,112
Income taxes 11,236 3,740
Current portion of long-term debt 27,947 30,536
----------- -----------
TOTAL CURRENT LIABILITIES 229,940 188,429
LONG-TERM DEBT 395,692 266,999
DEFERRED INCOME TAXES 27,301 26,080
OTHER LIABILITIES 29,688 24,081
ACCRUED RETIREMENT COSTS 77,008 66,014
STOCKHOLDERS' EQUITY
Common stock 2,132 1,763
Class B common stock 377 359
Capital in excess of par value 440,233 288,980
Retained earnings 106,025 105,849
Foreign currency translation
adjustment 6,876 (13,109)
Unearned compensation (41) (60)
Pension adjustment (7,279) (7,279)
----------- -----------
548,323 376,503
----------- -----------
$1,307,952 $948,106
=========== ===========
See notes to consolidated condensed financial statements.
<PAGE>
VISHAY INTERTECHNOLOGY, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
(Unaudited - In thousands except earnings per share)
Three Months Ended
September 30
1994 1993
----------- -----------
Net sales $260,963 $200,201
Costs of products sold 196,036 156,791
----------- -----------
GROSS PROFIT 64,927 43,410
Selling, general, and
administrative expenses 37,185 28,138
Restructuring expense - 1,738
Unusual item - (4,221)
Amortization of goodwill 1,489 799
----------- -----------
OPERATING INCOME 26,253 16,956
Other income (expense):
Interest expense (7,556) (4,753)
Other 43 393
----------- -----------
(7,513) (4,360)
----------- -----------
EARNINGS BEFORE INCOME TAXES 18,740 12,596
Income taxes 4,179 1,900
----------- -----------
NET EARNINGS $14,561 $10,696
=========== ===========
Net earnings per share $0.61 $0.48
=========== ===========
Weighted average shares outstanding 23,808 22,289
See notes to consolidated condensed financial statements.
<PAGE>
VISHAY INTERTECHNOLOGY, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
(Unaudited - In thousands except earnings per share)
Nine Months Ended
September 30
1994 1993
----------- -----------
Net sales $713,661 $652,354
Costs of products sold 542,482 508,810
----------- -----------
GROSS PROFIT 171,179 143,544
Selling, general, and
administrative expenses 98,812 89,188
Restructuring expense - 3,730
Unusual item - (7,221)
Amortization of goodwill 3,139 2,059
----------- -----------
OPERATING INCOME 69,228 55,788
Other income (expense):
Interest expense (17,992) (15,617)
Other 76 (68)
----------- -----------
(17,916) (15,685)
----------- -----------
EARNINGS BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE 51,312 40,103
Income taxes 9,867 6,287
----------- -----------
EARNINGS BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 41,445 33,816
Cumulative effect of accounting change
for income taxes - 1,427
----------- -----------
NET EARNINGS $41,445 $35,243
=========== ===========
Earnings per share:
Before cumulative effect
of accounting change $1.82 $1.51
Accounting change for income taxes _ $0.07
----------- -----------
Net earnings $1.82 $1.58
=========== ===========
Weighted average shares outstanding 22,803 22,288
See notes to consolidated condensed financial statements.
<PAGE>
VISHAY INTERTECHNOLOGY, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(Unaudited - In thousands)
Nine Months Ended
September 30
1994 1993
----------- -----------
OPERATING ACTIVITIES
Net earnings $41,445 $35,243
Adjustments to reconcile
net earnings to net cash provided
by operating activities:
Depreciation and amortization 40,995 36,333
Other, including cumulative
effect of accounting change 1,029 (1,083)
Changes in operating assets
and liabilities (53,125) (35,013)
----------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 30,344 35,480
INVESTING ACTIVITIES
Purchases of property and
equipment-net (64,102) (47,486)
Purchase of businesses, net of
cash acquired (179,673) (12,910)
----------- -----------
NET CASH USED IN
INVESTING ACTIVITIES (243,775) (60,396)
FINANCING ACTIVITIES
Proceeds from long-term borrowings 343,249 225,881
Payments on long-term borrowings (230,615) (195,745)
Net increase (decrease) in
short-term borrowings 10,809 (4,685)
Proceeds from sale of common stock 109,817 -
----------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 233,260 25,451
Effect of exchange rate
changes on cash 490 (89)
----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS 20,319 446
Cash and cash equivalents at
beginning of period 10,931 15,977
----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $31,250 $16,423
=========== ===========
See notes to consolidated condensed financial statements.
<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
September 30, 1994
Note 1: Basis of Presentation
The accompanying unaudited consolidated condensed financial statements
have been prepared in accordance with the instructions to Form 10-Q and
therefore do not include all information and footnotes necessary for
presentation of financial position, results of operations, and cash flows
required by generally accepted accounting principles for complete
financial statements. The information furnished reflects all adjustments
(consisting of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair summary of the financial position,
results of operations and cash flows for the interim periods presented.
The financial statements should be read in conjunction with the financial
statements and notes thereto filed with Form 10-K for the year ended
December 31, 1993.
Note 2: Earnings Per Share
Earnings per share amounts for all periods presented reflect a 5% stock
dividend paid on June 13, 1994. Earnings per share for the three month
and nine month periods ended September 30, 1994 reflect the weighted
effect of the issuance of 2.79 million shares of common stock in August
1994.
Note 3: Restructuring Charge and Unusual Item
The operating results for the quarter and nine months ended September 30,
1993 include restructuring expenses of $1,738,000 and $3,730,000,
respectively, relating to the downsizing of the Company's French
operations and income from unusual items of $4,221,000 and $7,221,000,
respectively, for business interruption insurance recoveries.
Note 4: Income Taxes
Effective January 1, 1993, the Company changed its method of accounting
for income taxes from the deferred method to the liability method
required by FASB Statement No. 109, "Accounting for Income Taxes". The
cumulative effect of adopting Statement No. 109 as of January 1, 1993 was
to increase net earnings by $1,427,000, or $.07 per share.
Note 5: Acquisition
In July 1994, the Company purchased all of the capital stock of Vitramon,
Incorporated and Vitramon Limited U.K. (collectively, "Vitramon") from
Thomas & Betts Corporation for $184,000,000 in cash. Vitramon is a
leading producer of multi-layer ceramic chip capacitors with
manufacturing facilities primarily in the United States, France, Germany
and the United Kingdom. For fiscal year 1993 Vitramon reported net sales
of approximately $118.4 million and net income of approximately $4.7
million.
The results of operations of Vitramon have been included in the Company's
results from July 1994. Excess of cost over the fair value of assets
acquired ($103,661,000) is being amortized on a straight-line basis over
40 years.
In connection with the acquisition of Vitramon, the Company borrowed an
aggregate of $200 million from a syndicate of banks, of which $100
million was a bridge facility that was subsequently paid off with
proceeds from an equity offering completed in August 1994 and $100
million is a non-amortizing term loan which is due in July 2001. The
existing bank agreements were amended to provide for lower interest
rates, the release of all collateral, and less restrictive financial
covenants. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Financial Condition".
Pro forma unaudited results of operations for the nine months ended
September 30, 1994 and 1993, assuming consummation of the acquisition and
related financing ($100,000,000 stock offering proceeds, $84,000,000 bank
loan) as of the beginning of the periods presented, are as follows (in
thousands, except per share data):
Pro Forma Pro forma
Nine Months Ended Nine Months Ended
September 30, 1994 September 30, 1993
Net sales $ 782,344 $ 742,536
Net earnings $ 47,528 $ 43,136
Net earnings per share $ 1.89 $ 1.72
Net earnings and net earnings per share for the nine months ended
September 30, 1993 include $1,427,000, or $.07 per share for the adoption
of Statement No. 109.
Note 6: Public Stock Offering
In August 1994, the Company completed an offering of 2,788,000 shares of
its common stock and received net proceeds of $109,817,000. The offering
was comprised of 2,200,000 shares sold in the U.S. and Canada, 550,000
shares sold outside the U.S. and Canada, and 38,000 shares sold upon the
exercise of an over-allotment option. The proceeds were used to prepay
the $100 million bridge facility loan relating to the Vitramon
acquisition and reduce revolving credit borrowings.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Net sales for the quarter and nine months ended September 30, 1994
increased $60,762,000 or 30.3% and $61,307,000 or 9.4%, respectively,
from the comparable periods of the prior year. The increases primarily
reflect the acquisition of Vitramon in July 1994. Net sales of Vitramon
were $34,529,000 for the quarter ended September 30, 1994. Net sales,
exclusive of Vitramon, increased by $26,233,000 or 13.1% and $26,778,000
or 4.1% for the quarter and nine months ended September 30, 1994,
respectively.
The weakening of the U.S. dollar against foreign currencies in the third
quarter of 1994 in comparison to the prior year's quarter has resulted in
an increase in reported sales of $6,936,000. However, for the nine months
ended September 30, 1994 overall foreign currency fluctuations have had
a minimal effect on reported sales.
Management believes its U.S. and European markets are continuing to show
signs of growth. Net sales, exclusive of Vitramon and foreign currency
fluctuations, in the United States and Europe have increased 9% and 11%,
respectively, over the third quarter of the prior year. For the nine
months ended September 30, 1994, the increases in the United States and
Europe were 7% and 2%, respectively. Net bookings, exclusive of Vitramon,
for the quarter and nine months ended September 30, 1994 increased by
11.6% and 9.0%, respectively, over the comparable periods of the prior
year. Net bookings of Vitramon, for the quarter ended September 30, 1994
increased by 41% over the prior year's quarter.
Costs of products sold for the quarter and nine months ended September
30, 1994 were 75.1% and 76.0% of net sales, respectively, as compared to
78.3% and 78.0%, respectively, for the comparable periods of the prior
year. The factors contributing to this decrease include: i) the fact that
gross profits for Vitramon are higher than Vishay's other operating
companies, ii) Israeli government grants of $3,033,000 and $7,190,000 for
the quarter and nine months ended September 30, 1994, respectively, as
compared to $808,000 and $1,851,000, respectively, for the comparable
periods of the prior year, and iii) an increase in production in Israel
where labor costs are generally lower than in other regions in which
Vishay manufactures. The period to period increases in Israeli government
grants have resulted primarily from an increase in the Company's work
force in Israel. The majority of the grants and other incentive programs
offered to the Company by the Israeli government will likely continue to
depend on increasing capital and the number of the Company's employees in
Israel. Exclusive of Israeli government grants and the acquisition of
Vitramon, costs of products sold were 78.4% and 77.7% of sales for the
quarter and nine months ended September 30, 1994, respectively, compared
to 78.7% and 78.3% for the comparable periods of the prior year.
Selling, general, and administrative expenses for the quarter and nine
months ended September 30, 1994 were 14.3% and 13.8% of net sales,
respectively, compared to 14.1% and 13.7% for the comparable periods of
the prior year. The current year's higher rates can be attributable to
the acquisition of Vitramon which has a higher percentage of selling,
general, and administrative expenses than Vishay. While management
believes these percentages to be acceptable, management continues to
explore additional cost saving opportunities.
Restructuring charges of $1,738,000 and $3,730,000 incurred during the
quarter and nine months ended September 30, 1993 related to the Company's
decision to downsize its French operations as a result of that country's
business climate. The Company recognized as income during the quarter and
nine months ended September 30, 1993 $4,221,000 and $7,221,000,
respectively, for an insurance recovery for lost profits from a business
interruption insurance claim.
Interest costs increased by $2,803,000 and $2,375,000 for the quarter and
nine months ended September 30, 1994 as a result of increased rates and
increased debt incurred for the acquisition of Vitramon.
The effective tax rates for the quarter and nine months ended September
30, 1994 were 22.3% and 19.2%, respectively, compared to 15.1% and 15.7%
for the comparable periods of the prior year. The effective tax rate for
calendar year 1993, exclusive of the effect of nontaxable insurance
proceeds, was 18.6%. The estimated 1994 rate anticipates the effect of
the acquisition of Vitramon in July 1994.
The effect of the low tax rates in Israel (as compared to the statutory
rate in the United States) has been to increase net earnings by
$3,883,000 and $3,521,000 for the quarters ended September 30, 1994 and
1993, respectively, and $9,825,000 and $7,385,000 for the nine months
ended September 30, 1994 and 1993, respectively. The period to period
increases are primarily a result of increased earnings for the Israeli
operations. The more favorable Israeli tax rates are applied to specific
approved projects and normally continue to be available for a period of
ten years. New projects are continually being introduced.
Included in net earnings for the nine months ended 1993 is a one-time tax
benefit of $1,427,000 resulting from the adoption of FASB Statement No.
109, "Accounting for Income Taxes".
Financial Condition
Cash flows from operations were $30,344,000 for the nine months ended
September 30, 1994 compared to $35,480,000 for the prior year's period.
The decrease in net cash provided by operating activities in comparison
to the prior year's period reflects $9,745,000 of cash payments made in
the first nine months of 1994 for accruals the Company established in
connection with the Sprague and Roederstein acquisitions. Purchases of
property and equipment for the nine months ended September 30, 1994 were
$64,102,000 compared to $47,486,000 in the prior year's period. This
increase reflects the Company's on-going program to purchase additional
equipment to meet growing customer demand for surface mount components.
Net cash provided by financing activities of $233,260,000 for the nine
months ended September 30, 1994, which includes $109,817,000 of proceeds
from a common stock offering, was used primarily to finance the
acquisition of Vitramon and additions to property and equipment.
The Company has established accruals relating to the Vitramon acquisition
of $15,000,000, consisting primarily of severance costs related to
planned work force reductions at Vitramon ($9,000,000), anticipated
environmental clean-up costs, which consist primarily of cost estimates
associated with possible soil excavation of existing metal contaminants
and the clean up of other existing contaminants at some Vitramon
facilities ($4,000,000), and an accrual for bonuses and contract
cancellation costs associated with Vitramon personnel and contracts
($2,000,000). The above accruals, which are included in other accrued
expenses, will not affect future earnings but will require cash
expenditures over the next twelve months.
In July 1994, the Company and certain of its subsidiaries entered into
agreements (the "Bank Agreements") with a group of banks, including
Comerica Bank, as agent for the banks ("Banks"). The Bank Agreements
amended and restated the Company's previously-existing revolving credit
and term loan agreements and added two new facilities that were used to
finance the acquisition of Vitramon.
After giving effect to the Bank Agreements, the Company's domestic credit
facilities consist of a $200,000,000 revolving credit facility that
matures in December 1997, subject to the Company's right to request year-
to-year renewals thereafter, a $102,500,000 term loan that matures in
December 2000 and a $100,000,000 non-amortizing term loan due in July
2001. Borrowings under these facilities bear interest at variable rates
based on the prime rate or, at the Company's option, LIBOR. A
$100,000,000 bridge facility used to finance the Vitramon acquisition was
paid off in August 1994 with proceeds from its equity offering.
The Banks also provided Deutsche Mark ("DM") denominated revolving credit
and term loan facilities for certain of the Company's German
subsidiaries, which permit borrowings, in the aggregate, of DM
153,821,990, including a DM 40,000,000 revolving credit facility that
matures in December 1997, subject to the borrower's right to request
year-to-year renewals thereafter, a DM 9,506,000 term loan that matures
in December 1994 and a DM 104,315,990 term loan that matures in December
1997. Borrowings bear interest at variable rates based on LIBOR. In
August 1994 the Company used proceeds from its equity offering to prepay
the DM 9,506,000 term loan.
As a result of the amendments contained in the Bank Agreements, all of
the Company's bank facilities are unsecured and all collateral held by
the Banks was released. However, the facilities are cross-guaranteed by
the Company and certain of its subsidiaries. The Bank Agreements also
resulted in a decrease in interest rates from those previously in effect
as well as a reduction in the number of financial and restrictive
covenants. Financial covenants are currently limited to requirements
regarding leverage and fixed charge coverage ratios and minimum tangible
net worth. Other restrictive covenants include limitations on the payment
of cash dividends, guarantees and liens.
The Company's financial condition at September 30, 1994 is strong, with
a current ratio of 2.3 to 1. The Company's ratio of long-term debt (less
current portion) to stockholders' equity was .7 to 1 at September 30,
1994 and December 31, 1993.
Management believes that available sources of credit, together with cash
expected to be generated from operations, will be sufficient to satisfy
the Company's anticipated financing needs for working capital and capital
expenditures during the next twelve months.
Inflation
Normally, inflation does not have a significant impact on the Company's
operations. The Company's products are not generally sold on long-term
contracts. Consequently, selling prices, to the extent permitted by
competition, can be adjusted to reflect cost increases caused by
inflation.
<PAGE>
VISHAY INTERTECHNOLOGY, INC.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Not applicable
(b) Reports on Form 8-K
On July 19, 1994 a Current Report on Form 8-K dated
July 18, 1994 was filed reporting under Item 2 that
Vishay had acquired the stock of Vitramon,
Incorporated and Vitramon Limited U.K. from Thomas &
Betts Corporation for $184 million in cash.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VISHAY INTERTECHNOLOGY, INC.
/s/ Richard N. Grubb
------------------------------------
Richard N. Grubb
Vice President, Treasurer
(Duly Authorized and Chief Financial
Officer)
Date: November 8, 1994
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VISHAY
INTERTECHNOLOGY, INC.'S QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER
30, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 31,250
<SECURITIES> 0
<RECEIVABLES> 175,398
<ALLOWANCES> 10,030
<INVENTORY> 285,166
<CURRENT-ASSETS> 530,278
<PP&E> 717,604
<DEPRECIATION> 189,625
<TOTAL-ASSETS> 1,307,952
<CURRENT-LIABILITIES> 229,940
<BONDS> 0
<COMMON> 2,132
0
0
<OTHER-SE> 546,191
<TOTAL-LIABILITY-AND-EQUITY> 1,307,952
<SALES> 713,661
<TOTAL-REVENUES> 713,661
<CGS> 542,482
<TOTAL-COSTS> 542,482
<OTHER-EXPENSES> 101,875
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,992
<INCOME-PRETAX> 51,312
<INCOME-TAX> 9,867
<INCOME-CONTINUING> 41,445
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41,445
<EPS-PRIMARY> 1.82
<EPS-DILUTED> 1.82
</TABLE>
